Fonterra about to announce reform plan

Dairy giant Fonterra is expected to unveil its second proposal for capital structure reform within days as the threat to its world-beating exporter status gathers pace in rival dairying countries. Parties close to the capital structure reform plan indicated NZ's biggest company would reveal the long-awaited proposal within a fortnight reports The NZ Herald. Fonterra, with revenue of $19 billion last year, is a co-operative owned by farmers through redeemable shares. To advance its global growth ambitions and stabilise its balance sheet against shocks such as drought, Fonterra needs more capital. A proposal by directors last year, which involved forming a company outside the co-operative with publicly listed shares, was rejected by Fonterra's 7000 farmer owners who feared loss of control and ownership. With the moribund United States dairy industry considering fundamental reform which could result in a drive to export, a new competitive focus by Irish dairy farmers, and European Union approval of a merger of Netherlands-based dairy heavyweights Campina and Friesland Foods, the clock is ticking against Fonterra's strategy to be a global food power. Farmer reaction to the second attempt by directors to muscle up Fonterra's balance sheet will determine if it stays a smallish co-operative mainly exporting commodities, or follows directors' long-held strategy to add-value to milk by becoming a serious world player in the highly lucrative ingredients and brands markets.